RUSSIA & EUROPE: MUST RELY

RUSSIA & EUROPE: MUST RELY

Europe has limited options for finding natural-gas supplies from outside of Russia despite tensions over Ukraine, the International Energy Agency's chief executive, Maria van der Hoeven, said on Monday.

"In the short term, Europe has very, very little means to diversify its gas imports," Ms. van der Hoeven said on the sidelines of the Offshore Northern Seas energy conference. "As far as we can see, Russian gas will be needed in Europe."

About a third of Europe's gas supply comes from Russia and a fifth is supplied by Norway, while other key sources include imported liquefied natural gas and producers like the Netherlands and the U.K., Ms. van der Hoeven said.

"If you want to change that and diversify, it takes time. You can't do it overnight," she said.

The agency—which advises industrialized nations on oil and gas policies—forecast last year that the European Union's annual gas imports would rise by some 140 billion cubic meters to 450 billion cubic meters by 2035, as indigenous production continues to drop.

Significant U.S. gas exports to Europe in the future are "an alternative that I think is not really very realistic because the gas is not yet there, and it will come at a price," Ms. van der Hoeven said.

The IEA has forecast the U.S. will export 50 billion cubic meters of natural gas annually in LNG form by 2035.

Norway's gas exports to Europe are expected to fade in the early 2020s.

That supply could potentially be replaced by increased pipeline supply from Azerbaijan and Kurdistan, more LNG from the U.S., the Eastern Mediterranean and Africa, and possibly also shale-gas production in Europe. However, Russia is expected to retain and even strengthen its position as a major gas supplier to Europe.

"Russian gas remains competitive against other alternatives and will continue to be the cornerstone of European gas supply," consulting firm Wood Mackenzie said in a June report. "Our long-term view is that the Europe-Russia gas relationship will continue out of necessity."

Norway's biggest oil and gas company, Statoil ASA, is a key gas supplier to Europe, and Chief Executive Helge Lund said Monday he hoped for a diplomatic solution to the tensions with Russia, partly because Europe depends on Russian gas.

"Europe and Russia will be energy partners for many decades to come. That is fundamental," he said.

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